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In these tough financial times, many companies are reducing their travel budgets – and that means fewer physical meetings. The economy and convenience of email, Facebook, Skype, and the like contribute to the shift toward virtual business encounters and away from traditional face-to-face meetings. Though there are surely economic and environmental advantages to limiting travel, are there also dangers inherent in a reduction of in-person contact?

In “the good old days” – as little as five years ago – it was strictly routine to conduct a negotiation half a continent away by catching an early flight, concluding your business, staying overnight (perhaps after an evening of socialising) and returning home the next day, signed contract in hand.

Today that is not necessarily the routine. Online conference calls, travel budget cuts, sub-optimization and the constant (though sometimes short-sighted) pursuit of profits have led to conduct of more and more meetings and negotiations via conference calls and virtual gatherings. Of course, providers of these electronic wonder products stress the obvious cost advantages, and companies eager for any possible savings jump at the offer.

In the long run, though, are we truly saving? Or is this a case of false economy? How much might we have gained by accepting the expense of the flight and accommodations, and meeting with our colleagues in person? This might be difficult to determine or document in strictly economic terms, but still...

Trust is the glue that binds a business agreement

In a speech before 600 corporate lawyers, I once stated, “a contract is not worth the paper it is written on.” This assertion was not popular four years ago, nor is it today. I am not arguing that we should not draft and sign written agreements; such documents are necessary, of course. However, a written agreement is not what makes a partnership or transaction successful. Rather, it is the relationships and trust established between the individuals entering into the mutual agreement. The human element is, and always will be, crucial to successful business.

The World Economic Forum has documented that over the past ten years, the general level of trust in our society has decreased by 44%. Indeed, the modern world has never experienced such a lack of trust among individuals, companies, and state organizations.

Today we trust one another less; and to an ever greater extent, our agreements are increasingly delineated and recorded in written documents rivalling the Treaty of Marseille in volume and complexity, at the hands of attorneys rather than through “old-fashioned” human assessment, evaluation and regard for gut feelings.

Research recently concluded that the widespread reduction in trust stems from a combination of the more prevalent use of electronic devices, as well as cultural differences, language barriers, and physical distances. They also observed that personal meetings frequently lessened the effects of these factors, and lead to greater trust.

According to studies in the field of interpersonal communications, levels of trust were primarily influenced by nonverbal communication in better than 90% of the cases examined. That is, body language, voice tone and inflections (rather than the words used) were the chief factors determining trust. In only 7% of the cases was trust based primarily on the words exchanged.

Trust is rarely created through an email correspondence, over the phone, or through video conferencing. Trust is born in the handshake, the interpersonal chemistry, the facial expressions, the body language, the tone, gender, the dinner, the coffee, the nightclub or the restaurant.

Further international research has shown that an agreement based on trust, rather than on legal verbiage and complexities, produces 40% more value. Furthermore, establishing trust among the parties involved increases the likelihood of success in reaching an agreement by 100%.

Technology and trust

Humans have successfully adopted technological advances like the automobile, electricity, the telephone, the Internet and email. Such developments should certainly continue. Despite all the advances, though, we have not stopped walking, using candles, or writing letters – nor should we. We simply need to be wise in the ways we integrate technology into our lives, and into commerce. Online video meetings, for example, can reduce expenses and the environmental impacts of excessive travel; at a personal level, they can also prevent jetlag and other travel-related stresses. While they cannot ever wholly replace in-person meetings, they do serve admirably once trust and baseline agreements have been firmly established through direct contact.

When are savings really savings?

Keeping in mind what we’ve discussed, let’s examine some basic preconditions and questions for debate as to the point where perceived savings may become actual lost gains:

• What are the criteria for evaluating potential long-term agreements and relationships?

Initial costs, prices, and packaging (appearances) are factors, but they are of lesser importance. It is to be hoped that we will not be so foolish as to select our partners in commerce based solely on low costs, or on outward appearances. So how do we assure ourselves of ongoing quality and viable TCO, for more than just one or two years into the future?

• What is the optimum balance to observe in assessing expectations and obligations in a commercial relationship?